C-230 Part 4: Case Studies
Matt Ryan on next-generation retailing and payments
initiatives.^45 One such new initiative the company planned
to launch by the end of 2014 was mobile ordering.^46
In its FY2014 second-quarter earnings conference
call, Schultz stated that as the retail industry’s “unques-
tioned” leader in mobile payment and mobile loyalty,
Starbucks was uniquely positioned to develop and mon-
etize its digital leadership into new platforms, revenue
streams, and growth.^47 As an example, Schultz revealed
that Starbucks had been approached by major tech com-
panies and retailers about licensing its mobile technol-
ogy and platforms and said the company was taking a
very “thoughtful and disciplined” approach to analyzing
these overtures.^48
Starbucks also invested heavily in social media
during this time, including the Starbucks Digital
Network, as well as Facebook, Twitter, Instagram,
Pinterest, YouTube, Google+, and a successful crowd-
sourcing platform called My Starbucks Idea, which
served not only to generate ideas, but also as a tool for
marketing and customer engagement. The company’s
Twitter presence became even more lucrative when it
started a Tweet-a-Coffee campaign in October 2013.
Through the campaign, customers could send friends
a $5 Starbucks gift card via Twitter by first linking their
Starbucks accounts and credit cards to the social media
platform. By December of that year, Starbucks had
linked 54,000 users’ Twitter IDs to their mobile phones
and customer IDs—a boon that far overshadowed the
$180,000 in purchases that were made through the pro-
gram in its first two months. With more than 33 million
fans, Starbucks was one of the most “liked” consumer
brands on Facebook,^49 and its My Starbucks Idea online
community had generated more than 80,000 ideas. One
of the most popular customer-generated ideas was dig-
ital tipping, which Starbucks added as a feature to its
mobile payment app in 2014.
To advertise its focus on both operational excel-
lence and growth through innovation, Starbucks also
announced plans to leverage the Internet of Things by
turning its store refrigerators and coffee makers into
smart machines that could alert store employees when
the milk was about to spoil, for example. The company
also planned to experiment with coffee cup sensors to
monitor coffee quality and collect data on such customer
preferences as cream and sugar.^50
The company clearly saw Digital Ventures as a major
driver of new growth, customer loyalty, and shareholder
value; however, Starbucks continued to bet heavily on
international expansion by planning for almost 900 new
global stores in 2014.
EMEA
The company’s EMEA business segment continued to strug-
gle toward profitability during this period. Comprising 8%
of total revenues, comparable-store sales remained flat in
2012 and 2013. Due to cost-management efforts and a major
shift in ownership structure away from company-operated
stores in favor of licensed and franchised stores, however,
EMEA operating margins improved to 5.5% in fiscal 2013,
and a 2% growth in total revenue for 2013 came from
licensed-store revenue growth.^51
Under a store licensing model, previously shunned
by the company before the transformation but now
making up a large and growing percentage of its inter-
national revenue, Starbucks received a reduced share
of store revenues but also a disproportionately reduced
share of expenses borne mostly by the licensee. At the
end of FY2013, the region had 853 company-operated
stores and 1,116 licensed stores, down from 911 and up
from 707 respectively in 2009.^52
By Q2 FY14, same stores for EMEA were up 6%.^53CAP
In contrast to EMEA, the relatively young CAP segment
increased revenues by 27% in 2013. Although it only
comprised 6% of the company’s total revenues, it was the
fastest-growing business segment and had the highest
profit margin. During 2013, the company added 600 net
new stores, including 317 in China and its first stores in
Vietnam and India.^54 Starbucks clearly saw the region as
one of the major sources of growth and said it planned
to have 1,500 stores in China by the end of 2015.^55 But it
was India that earned the title of fastest-growing market
in Starbucks history during this period. Through a 50-50
joint venture with Tata Global Beverages Limited, the
first Starbucks store opened in October 2012, and India
had a total of 40 stores only 17 months later.^56
“The biggest opportunity we have is clearly in Asia,”
Schultz told the Wall Street Journal in September 2013.
“We’ve been in China now for over a decade. The most
gratifying thing is, when we first got there, most of our
customers were tourists and expats, and now they’re
Chinese nationals.”^57Channel Development
Probably the most interesting part of Starbucks’ post-
transformation growth story occurred outside the iconic
Starbucks coffee shop. What had started with the sale of
packaged Starbucks and Seattle’s Best Coffee beans and
ground coffee at supermarkets grew during this period
into an aggressive, multifaceted strategy to turn the coffee